Immediately after the Jabong acquisition, Flipkart is back in the news. This time is for the announcement of layoffs. While the firm reported that the layoff would affect 1 to 2% of the workforce, several media reports mention around 1,000 employees will be affected. Flipkart has about 30,000 employees, which means the decision affects about 2.3-3.3% of the workforce.
Here the what Flipkart is getting right and not so right in this process:
The Good: Communication is critical when it comes to layoffs, it avoids rumors and agitation, Flipkart has faired well in proactively communicating. Other e-tailers in the last 12 months have also done layoffs, but they have not expressed it openly either internally nor externally. Lack of communication creates mistrust, confusion, and rumors. For the Flipkart management to openly communicate and talk about the situation of the organization and how it will affect employees, we give them a green light.
The Bad: What Flipkart is saying is that this exercise is an effort to make the organization leaner, and to exit employees that are not performing. The reality is that this development comes under the firm falling valuation the second time this month. Coupled with the need of the company to cut their monthly burn rate in half (from $80 million to $40 million in H1 if 2016). Flipkart should be calling a spade a spade. If the company is unable to meet the valuation targets and has pressures on reducing costs, it is natural that may need to reduce personnel and in that process, of course, the lower performing employees will need to go first. But saying this is an employee performance exercise and not a failure of the company to perform, is misleading.
The Ugly: This is not the 1st time this year that Flipkart is criticized for their decisions on hiring and firing. The company also faced criticism earlier this year after it deferred the joining dates for campus recruits from IIMs and IITs. These decisions create uncertainty in the market for candidates and affect the attractiveness of the firm from Employer Branding perspective.
Downsizing is a necessary evil in today’s business environment and getting it right is challenging as many variables, including emotions which are also at stake. We invite you to read our last cover story Tailoring the right size for a collection of real stories and first-hand advice and perspectives to prevent and manage layoffs.